Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality

19 Pages Posted: 20 Jan 2016

See all articles by Andreas Fagereng

Andreas Fagereng

Statistics Norway

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF)

Davide Malacrino

International Monetary Fund

Luigi Pistaferri

Stanford University; Centre for Economic Policy Research (CEPR)

Date Written: January 2016

Abstract

Lacking a long time series on the assets of the very wealthy, Saez and Zucman (2015) use US tax records to obtain estimates of wealth holdings by capitalizing asset income from tax returns. They document marked upward trends in wealth concentration. We use data on tax returns and actual wealth holdings from tax records for the whole Norwegian population to test the robustness of the methodology. We document that measures of wealth based on the capitalization approach can lead to misleading conclusions about the level and the dynamics of wealth inequality if returns are heterogeneous and even moderately correlated with wealth.

Keywords: Heterogeneity, Returns to Wealth, Wealth Inequality

JEL Classification: E13, E21, E24

Suggested Citation

Fagereng, Andreas and Guiso, Luigi and Malacrino, Davide and Pistaferri, Luigi, Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality (January 2016). CEPR Discussion Paper No. DP11047. Available at SSRN: https://ssrn.com/abstract=2717596

Andreas Fagereng (Contact Author)

Statistics Norway ( email )

Postboks 8131 Dep, 0033 Oslo
Oslo, Oslo 0033
Norway
+47 2109 4700 (Phone)

HOME PAGE: http://sites.google.com/site/andreasfagereng/

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Davide Malacrino

International Monetary Fund ( email )

700 19th St NW
Washington, DC 20001
United States

Luigi Pistaferri

Stanford University ( email )

Stanford, CA 94305
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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